Mortgage rates are going up, but that doesn’t mean that retirees can’t use mortgages for seniors, which allow them to downsize, buy a second home, or use their home equity to pay off debt or make home improvements. Learn about the commercial mortgage truerate services.
There are many mortgages for seniors, but it’s important to think about your finances. Here’s what you should know about home loans for seniors.
Are There Ways For Seniors To Get A Mortgage?
We’ve always been told that before we retire, we should pay off our mortgages and have as little debt as possible. But retirees should remember that there are many reasons why they might not want to follow this advice.
Some of the most common reasons for senior mortgages are as follows:
- Due to less money coming in, refinancing to lower monthly payments
- A lot of equity but not much money saved for retirement
- There is a lot of debt, but there is no money to pay it off.
- Getting a smaller house.
- Getting a second home.
- Adding to a fund for emergencies.
- Repairs or changes to the house.
- Buying a home for their children or grandchildren who didn’t qualify.
- Things for older people to think about before getting a home loan.
It can be hard to plan for the future. But before you take out a loan as a senior, there are a few things you should think about.
Lifestyle
As people learn more about themselves and the world, their tastes and ways of living change. This makes it harder to decide early on how we want to live in retirement and how much money we need to save for it.
Even though many seniors look forward to moving into a busy retirement community where they can pursue their interests, others would rather live in the country and tend to a garden or travel the world.
Income
When you retire, your income and cash flow change, as does the way you live. If you know how much money you can count on getting each month, you’ll be better able to choose the right kind of home. Things like HOA dues, insurance premiums, and tax rates can add up quickly.
Needs
As you get older, your needs often change. This is especially important when deciding if you want to live in a house that is easier to get to and easier to change.
How to Get Mortgages for Seniors
When you’re in the middle of your working life and your income is high and stable, it’s often easier to get a mortgage. When you’re older, though, it can be overwhelming to think about it. Finding the right retirement home is important, but so is getting the right kind of senior mortgage.
- In order to get a senior mortgage, you must:
- Even if it’s less than it used to be, income
- Score for credit
- Ratio of debt to income (DTI)
- Cash on hand
- The first home could have equity (if applicable)
- Investment assets (even though most lenders can only look at 70% of them)
For a conventional loan backed by Fannie Mae or Freddie Mac, most lenders want to see a credit score of at least 620. Some lenders might be okay with a DTI of 50%, but most would rather see a DTI of less than 45%. Find a Total Mortgage expert at a location near you when you’re ready to apply for a home loan.
6 Ways For Seniors To Get A Mortgage
Seniors can choose from a number of mortgage options, and some are even made with seniors in mind. Here are some mortgages for seniors to think about.
Asset Depletion Loans
This loan can help people who have lost their usual source of income due to retirement buy or refinance a home. This type of loan is similar to a traditional mortgage, with one important difference: it depends on how much cash the borrower already has.
If you want to get an asset depletion loan, you’ll need a lot of cash. Fannie Mae & Freddie Mac Senior Home Buying Programs. You can qualify for a Fannie Mae loan with retirement income from assets like 401(k) plans. However, the borrower must show that they have enough income for the next three years. Freddie Mac, in particular, made it easier for people with low incomes but a lot of assets to qualify for mortgages.
Lenders look at these things:
IRAs
401(k)
Lump sum retirement account distributions
Mutual funds
Assets in cash
The Possibility Of Selling The Current House Or Business
The borrower’s IRA and 401(k) accounts must pass a thorough review and be easily accessible with no penalties for early withdrawal. They also can’t be your only source of income.
Refinance With Cash-Out
If you own a home and have paid off most or all of your mortgage, you may be able to cash out some of the equity you’ve built up in it. When you refinance, you usually get a new mortgage with better terms than your old one, like a lower interest rate and a shorter time to pay it off.
Line Of Credit On Your Home’s Value (HELOC)
With a HELOC, you use a portion of your home’s equity to get a loan that works like a credit card. This is similar to a cash-out refinancing. In this case, you are given a credit line from which you can take money out as you need it over a certain time period.
Mortgage Equity Loan
The home equity loan is another type of loan that lets people use their valuable equity. These loans have a fixed interest rate and are paid back all at once. For five to thirty years, you will get a certain amount each month. But this type of borrowing usually requires at least 20% of your own money.
Mortgage to Turn Home Equity Into Cash (HECM)
As the only reverse mortgage backed by the federal government, the home equity conversion mortgage (HECM) is a less well-known option for retirees that can be gotten from FHA-approved lenders.
To qualify, you must:
- Be 62 years old or older.
- Pay off your house (or be close)
- Live in the house as your main home.
- Have no federal or delinquent debt
- Be able to pay for the costs of maintenance (property taxes, insurance, HOA fees, and others)
- Check the HECM website for more information and requirements, such as the type of property you own.
Check Out Total Mortgage’s Home Loans For Seniors
Many retirees have to make a big decision when they try to find the best senior mortgage, since there are so many options and problems like less money in retirement. But with the right mortgage lender, it won’t be hard to find the best home loan and get the best deal.
Total Mortgage can help you think about your options when you’re ready to take the first step toward finding the right senior mortgage. Find the closest Total Mortgage branch or apply online to get a free rate quote.
